ADDITIONAL TERMS/ACKNOWLEDGMENTS: This grant is a part of a total grant of 750,000 shares by the Board as an inducement to

your continued consultancy with the Company with the balance documented in a separate option agreement. The undersigned Optionee

acknowledges receipt of, and represents that the Optionee has read, understands, accepts and agrees to the terms of this Grant Notice and the

Stock Option Agreement. Optionee hereby accepts the Option subject to all of its terms and conditions and further acknowledges that as of the

Date of Grant, this Grant Notice and the Stock Option Agreement set forth the entire understanding between Optionee and the Company

regarding the acquisition of stock in the Company and supersede all prior oral and written agreements pertaining to this particular option.

Optionee: Pat Nunally

Grant No: S-04

Date of Grant: 10/2/2006

Shares Subject to Option: 250,000 common shares

Exercise Price Per Share: $0.16

Expiration Date: 10/2/2010

Intended to be Incentive Stock Option: No

VESTING SCHEDULE:

Vesting Start Date Vesting Schedule

(on performance) Subject to continuing Service (as defined in the Stock Option

Agreement) this option becomes exercisable with respect to the Shares

Subject to Option only upon e.Digital’s receipt of an aggregate of

twenty-five million ($25,000,000) dollars in licensing fees resulting

from any Contingency Representation Agreement with a law firm

partner (net after all costs, attorneys fees and expenses) prior to the

Expiration Date.